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DLC

28 August 2009

DELCAM PLC

('Delcam' or 'the Company')

Half Year Report

For the six months to 30 June 2009

• Very challenging market conditions with manufacturer customer base deferring software spend

• Sales of £16.1m (2008: £16.9m) 

• Recurring maintenance revenues, derived from software maintenance and support contracts, increased by 13% to £5.8m (2008: £5.1m), representing 36% of total sales

• Strategic decision to continue to maintain high level of software R&D investment for market advantage - £4.7m invested in the period (2008: £4.5m) 

• Pre-tax tax profit of £0.3m (2008: £1.4m)

• Basic earnings per share of 3.2p (2008: 14.9p) 

• Net cash of £5.8m at 30 June 2009 (2008: £6.4m)

• Interim dividend maintained at 1.35p (2008: 1.35p)

• Board remains confident of Delcam's ability to build market share during the downturn 

Peter Miles, Chairman, commented,

'Reflecting the global financial and economic crisis, the trading environment in 2009 has been challenging and the impact of the downturn in the manufacturing sector has been even harder than we initially anticipated at the end of last year. With many companies postponing their investments in capital equipment, it is to be expected that the associated software sales should also be delayed. 

However, as we stated in our 2008 annual report, given Delcam's strong financial position and high level of recurring income, we believe that the business is well placed to see out the near-term challenges. In particular, we are continuing to invest significantly in product development and marketing. This provides us with an increasing commercial advantage and will help to support our ambitions to build our market share during the downturn.'

Enquiries: 

Website: www.delcam.com

Delcam plc		Clive Martell, Managing Director Kulwant Singh, Finance Director Hugh Humphreys, Deputy Chairman		T: 0121 683 1000
Biddicks		Katie Tzouliadis		T: 020 7448 1000
WH Ireland (NOMAD)		Robin Gwyn		T: 0161 832 6644

Chairman's Statement

Reflecting the global financial and economic crisis, the trading environment in 2009 has been challenging and the impact of the downturn in the manufacturing sector has been even harder than we initially anticipated at the end of last year. However, as we stated in our 2008 annual report, given Delcam's strong financial position and high level of recurring income, we believe that the business is well placed to see out the near-term challenges. In particular, we are continuing to invest significantly in product development and marketing. This provides us with an increasing commercial advantage and will help to support our ambitions to build our market share during the downturn.

Against a very difficult trading backdrop, results for the first half of the financial year, traditionally our weaker trading period, are in the circumstances pleasing. Our strong global distribution channels and our diversification into a broader range of industries, in particular into the medical, dental and footwear sectors, continue to help to underpin our performance.   

Financial Results 

Sales for the six months to 30 June 2009 were £16.1 million compared to £16.9 million in the first half of last year. Income from maintenance revenues, derived from software maintenance and support contracts, increased to £5.8 million over the period from £5.1 million in the first half of last year. This recurring, highly predictable revenue stream accounted for 36% of revenue. 

In line with our strategy, the Company continues its investment in product development at the high levels we believe to be necessary for our long-term success. This resulted in £4.7 million (2008: £4.5 million) being invested over the period.

Profit before tax for the period amounted to £0.31 million compared with £1.42 million during the first six months of 2008 and basic earnings per share were 3.2p against 14.9p last year.  

The balance sheet remains strong with net cash of £5.8 million (31 December 2008: £6.4 million).  

Dividend

We are pleased to declare a maintained interim dividend payment of 1.35p per ordinary share (2008: 1.35p). This will be paid on 28 September 2009 to shareholders on the Register as at 11 September 2009. The ex-dividend date is 9 September 2009.

Review

The reduction in global manufacturing has affected new sales across the full range of Delcam's products. Many of our software sales are made to companies that are expanding their manufacturing capacity. With many companies postponing their investments in capital equipment, it is to be expected that the associated software sales should also be delayed. While this represents the general global picture, revenues from India and China have continued their growth, albeit at a lower rate than in recent years.  Revenues from our international business have been insulated to a certain extent by the depreciation of Sterling against the US Dollar and the Euro. However, Sterling's weakness also resulted in higher administrative expenses in our overseas subsidiaries. The overall net benefit of its depreciation was therefore reduced somewhat. 

Income from software maintenance and support services from our existing customers continues to grow strongly. This reflects the high value that our users place on the regular enhancements to our software products and on the high level of service support they receive from our organisation.

Sales of our newer software products for the medical, dental and footwear industries continue to show encouraging growth. We believe that these markets represent very good growth areas for us and have increased the proportion of our development and marketing resources devoted to them. Our experience and expertise in developing software for the design, machining and inspection of complex shapes can be transferred to the benefit of these new customers and used by them to reduce their production costs, shorten their lead times and improve the quality and consistency of their manufacturing processes.

We have continued to increase the investment in our Professional Services Group and our Tooling Services Division which work together to provide process development and pre-production manufacturing services. In February, we opened an Asian Division of the Professional Services Group based in Singapore and have added a new large five-axis machine tool in the Tooling Services Division. 

We are pleased that the latest industry survey, published by independent global consulting analysts, CIMdata, shows that we have moved up to third place in the overall rankings of developers of NC software and services and have strengthened our position as the world's leading specialist supplier of CAM software.

New Managing Director

At Delcam's Annual General Meeting in May 2009, we were delighted to announce that Clive Martell, the Company's Operations Director, would be taking up the role of Managing Director on 1 August 2009. Clive was previously responsible for the day-to-day management of the Company's operations worldwide.  His appointment as Managing Director followed Hugh Humphrey's decision to retire from that position after 20 years' stewardship. We are pleased that Hugh is remaining on the Board as an Executive Director and Deputy Chairman. These role changes have now taken effect.  

Outlook

The current global economic uncertainty makes it harder than usual to predict how well the Company will perform in the second half and especially in the last quarter, which historically is our most important trading period in the year. However, we anticipate an improvement in profitability in the second half of the year.  Our strong balance sheet, broad portfolio of existing products and new products scheduled for release during the remainder of the year mean that we are well positioned to respond to any increase in manufacturing activity. In addition, we believe that the spread of our activities across a diverse range of industries and geographic territories will help us to perform better than many of our competitors. 

Looking further ahead, we continue to view long-term prospects for the Company positively.

Peter Miles

Chairman

28 August 2009

  

CONDENSED CONSOLIDATED INCOME STATEMENT

		Unaudited Six months	Unaudited Six months	Audited Year
		to 30 June 2009	to 30 June 2008	to 31 Dec 2008 (restated *)
	Notes	£'000	£'000	£'000
Continuing Operations
Revenue	1	16,100	16,902	32,884
Cost of sales		(5,447)	(5,437)	(10,473)
Gross profit		10,653	11,465	22,411
Administrative expenses Distribution costs Other operating income		(6,822) (3,684) 119	(6,372) (3,881) 105	(13,039) (7,892) 150
Operating profit		266	1,317	1,630
Share of associates' operating loss		(8)	(56)	(34)
Net finance income		52	159	663
Profit before tax		310	1,420	2,259
Tax	5	(60)	(281)	(625)
Profit for the period		250	1,139	1,634
Attributable to
Equity holders of the parent company		250	1,148	1,634
Equity minority interests		-	(9)	-
		250	1,139	1,634
Earnings per share
From continuing operations
Basic	2	3.2p	14.9p	21.2p
Diluted	2	3.2p	14.5p	21.2p

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

		Unaudited	Unaudited	Audited
		Six months	Six months	Year
		to 30 June 2009	to 30 June 2008	to 31 Dec 2008
		£'000	£'000	£'000
Profit for the period		250	1,139	1,634
Other comprehensive income:
- Foreign currency translation differences		112	83	(113)
- Actuarial gains and losses on defined benefit scheme		-	-	(1,681)
- Tax on items taken directly to equity		6	(27)	310
Total comprehensive income for the period attributable to equity shareholders		368	1,195	150

* the restatement relates to a reclassification adjustment for a exchange rate loss of £372k from overheads to cost of sales.    CONDENSED CONSOLIDATED BALANCE SHEET

		Unaudited As at	Unaudited As at	Audited As at
		30 June 2009	30 June 2008	31 Dec 2008
	Notes	£'000	£'000	£'000
Non-current assets
Goodwill		2,216	2,261	2,216
Other intangible assets		2,246	2,056	2,316
Property, plant & equipment		7,485	7,027	7,108
Interests in associates		654	628	756
Other investments		26	26	26
		12,627	11,998	12,422
Current assets
Inventories		478	206	375
Trade and other receivables Assets held at fair value through profit and loss		6,626 157	8,674 -	8,591 -
Cash and cash equivalents	3	7,566	8,130	8,130
		14,827	17,010	17,096
Total assets		27,454	29,008	29,518
Current liabilities
Trade and other payables		(4,828)	(5,646)	(6,105)
Current tax liabilities		(77)	(270)	(265)
Borrowings		(680)	(1,525)	(706)
Liabilities held at fair value through profit and loss		-	-	(660)
Deferred income		(2,775)	(2,570)	(2,849)
		(8,360)	(10,011)	(10,585)
Non-current liabilities
Retirement benefit obligation		(1,075)	-	(1,075)
Deferred tax liabilities		(403)	(583)	(407)
Borrowings		(1,044)	(833)	(1,018)
Deferred income		(71)	(61)	(73)
		(2,593)	(1,477)	(2,573)
Total liabilities		(10,953)	(11,488)	(13,158)
Net assets		16,501	17,520	16,360
Equity
Share capital		779	779	779
Share premium		8,078	8,078	8,078
Investment in own shares		(491)	(499)	(523)
Revaluation reserve		1,444	1,461	1,455
Capital reserve		9	9	9
Translation reserve		(84)	-	(196)
Retained earnings		6,766	7,630	6,758
Equity attributed to equity holders of the parent		16,501	17,458	16,360
Minority interests		-	62	-
Total equity		16,501	17,520	16,360

  CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Share capital account £'000	Share premium account £'000	Invest- ment in own shares £'000	Capital reserves £'000	Reval -uation   reserve £'000	Trans-    lation  reserve £'000	Retained earnings £'000	Total £'000
At 1 January 2008	779	8,074	(297)	9	1,477	(83)	6,768	16,727
Total comprehensive income for the period	-	-	-	-	-	83	1,112	1,195
Dividends paid	-	-	-	-	-	-	(309)	(309)
Transfers	-	-	-	-	(16)	-	16	-
Investment in own shares	-	-	(202)	-	-	-	-	(202)
Share based payments	-	-	-	-	-	-	43	43
New share issue	-	4	-	-	-	-	-	4
At 30 June 2008	779	8,078	(499)	9	1,461	-	7,630	17,458
Total comprehensive income for the period	-	-	-	-	-	(196)	(849)	(1,045)
Dividends paid	-	-	-	-	-	-	(102)	(102)
Deferred tax	-	-	-	-	10	-	-	10
Transfers	-	-	-	-	(16)	-	16	-
Investment in own shares	-	-	(24)	-	-	-	-	(24)
Share based payments	-	-	-	-	-	-	63	63
At 31 December 2008	779	8,078	(523)	9	1,455	(196)	6,758	16,360
Total comprehensive income for the period	-	-	-	-	6	112	250	368
Dividends paid	-	-	-	-	-	-	(301)	(301)
Transfers	-	-	-	-	(17)	-	17	-
Investment in own shares	-	-	32	-	-	-	-	32
Share based payments	-	-	-	-	-	-	42	42
At 30 June 2009	779	8,078	(491)	9	1,444	(84)	6,766	16,501

  CONDENSED CONSOLIDATED CASH FLOW STATEMENT

		Unaudited Six months to 30 June 2009	Unaudited Six months to 30 June 2008	Audited Year   to 31 Dec 2008
		£'000	£'000	£'000
Operating profit from continuing operations		266	1,317	1,630
Adjustments for:
Depreciation and amortisation		613	502	885
Loss on sale of tangible fixed assets		8	-	39
Fair value through profit and loss		(817)	-	372
Share based payments		42	43	106
Operating cash inflow before working capital movements		112	1,862	3,032
Movement in working capital		1,402	(628)	705
Cash generated by operations		1,514	1,234	3,737
Additional pension payment Taxation paid		(53) (248)	(50) (223)	(112) (517)
Net interest received		52	159	169
Cash inflow from operating activities		1,265	1,120	3,277
Investing activities
Purchases of fixed assets and investments		(931)	(218)	(529)
Expenditure on product development		(170)	(260)	(553)
Deferred consideration payments		-	(302)	(333)
Payments to acquire investment in own shares		(70)	(299)	(226)
Net cash used in investing activities		(1,171)	(1,079)	(1,641)
Financing activities
Dividends paid		(301)	(309)	(411)
Proceeds from new share capital		-	-	4
Repayment of borrowings		(322)	(301)	(1,331)
New finance leases advanced		450	-	-
Restricted cash movement		(140)	693	694
Net cash used in/generated from financing activities		(313)	83	(1,044)
(Decrease)/increase in cash and cash equivalents		(219)	124	592
Cash and cash equivalents at 1 January		8,130	6,906	6,906
Effect of foreign exchange rate changes		(345)	83	632
Cash and cash equivalents at end of the period		7,566	7,113	8,130
Analysis of cash and cash equivalents
Cash and cash equivalents		7,566	8,130	8,130
Bank overdraft		-	(1,017)	-
		7,566	7,113	8,130

  

Notes to the consolidated financial statements

 

1. Segment information

Business Segment

Revenue	Six months	Six months	Year
	to 30 June 2009	to 30 June 2008	to 31 Dec 2008
	£'000	£'000	£'000
Software	6,942	8,792	16,430
Maintenance	5,814	5,137	9,684
Services	2,850	2,363	5,809
Other	494	610	961
Continuing operations	16,100	16,902	32,884

Geographical segments

Revenue	Six months	Six months	Year
	to 30 June 2009	to 30 June 2008	to 31 Dec 2008
	£'000	£'000	£'000
Europe	9,388	9,765	17,945
Americas	3,672	3,575	8,249
Far East	2,068	3,089	6,049
Rest of World	972	473	641
Continuing operations	16,100	16,902	32,884

2. Earnings per share

	Six months	Six months	Year
	to 30 June 2009	to 30 June 2008	to 31 Dec 2008
Earnings - continuing	£'000	£'000	£'000
Profit attributable to equity holders of the parent	250	1,148	1,634
Weighted average number of shares	'000	'000	'000
For basic earnings per share	7,715	7,715	7,715
Scheme options	-	200	-
For diluted earnings per share	7,715	7,915	7,715
Earnings per share
Continuing  - basic	3.2p	14.9p	21.2p
- diluted	3.2p	14.5p	21.2p

3. Restricted cash

At 30 June 2009, included within cash at bank and in hand and trade and other payables is £1.2 million (30 June 2008: £1.4 million) that relates to monies received by the Company for a grant in respect of a European project. This cash is restricted as the Company has been nominated to administer the funds, which are to be distributed to several other independent partners. Therefore this cash is not considered as part of the net owned funds of the Company at 30 June 2009. 

4. Basis of preparation and accounting policies

Delcam Plc is incorporated and domiciled in the United Kingdom. The interim financial statements for the period ended 30 June 2009 (including the comparatives for the period ended 30 June 2008 and the year ended 31 December 2008) were approved by the board of directors on 28 August 2009. Under the Security Regulations Act of the EU, amendments to the financial statements are not permitted after they have been approved.

It should be noted that the accounting estimates and assumptions are used in the preparation of the interim financial information. The interim financial information contained within this report does not constitute statutory accounts as defined in the Companies Act 2006. The full accounts for the year ended 31 December 2008 received an unqualified report from the auditors and did not contain a statement under section 237(2) or (3) of the Companies Act 1985.

This interim financial report has been prepared under the historical cost convention. The principal accounting policies and methods of computation adopted are consistent with those detailed in the 2008 financial statements except for the first time adoption of IAS 1 'Presentation of Financial Statements (Revised 2007)' and IFRS 8 'Operating Segments'.

The adoption of IAS 1 (Revised 2007) does not affect the financial position or profits of the Group but does give rise to additional disclosures. IAS 1 (Revised 2007) affects the presentation of owner changes in equity and introduces a 'Statement of comprehensive income'. The adoption of IFRS 8 had not required a change to the presentation of the segments disclosed in the interim financial statements.

5. The taxation charge is based on the estimated effective rate of tax for the full year.

6. Copies of this statement are being sent to shareholders. Further copies are available from the Company Secretary at the Registered Office of the Company, Small Heath Business Park, Birmingham, B10 0HJ. A copy of the interim report is also available on the www.delcam.com website.

ENDIR PUUMPRUPBGQM